The following is an exact excerpt from the fiscal year 2018 proposed budget that addresses the U.S. Postal Service. You can find the proposed budget here (PDF) – scroll to page 1206 and 1207 (updated).

The Postal Reorganization Act of 1970, Public Law 91–375, converted the Post Office Department into the U.S. Postal Service (Postal Service), an independent establishment within the executive branch. The Postal Service commenced operations July 1, 1971. This agency is charged with providing patrons with reliable mail service at reasonable rates and fees.

The Postal Service is governed by an 11-member Board of Governors, including nine Governors appointed by the President, a Postmaster General who is selected by the Governors, and a Deputy Postmaster General who is selected by the Governors and the Postmaster General.

Since 1971, there have been several Postal reforms. Notably, the Omnibus Budget Reconciliation Act of 1989 (P.L. 101–239) moved the Postal Service “off-budget” so that, beginning in 1990, the receipts and disbursements of the Fund are not considered within the on-budget net spending totals, although they are included within the unified spending and deficit totals. More recently, the 2006 Postal Accountability and Enhancement Act (P.L. 109–435) made a number of changes affecting the operations and oversight of the Postal Service. The Act provided for separate accounting and reporting for market-dominant products such as First-Class mail and competitive products such as package delivery. The Act amended the process for determining rate increases for market-dominant products, in part by imposing a limitation on rate increases linked to the Consumer Price Index for All Urban Consumers (CPI-U). In 2017, the Postal Regulatory Commission
will determine if changes should be made to the rate structure including whether to continue the CPI-U cap on increases.

The Act also created the Postal Service Retiree Health Benefits Fund to put the Postal Service on a path that fully funds its substantial retiree (annuitant)
health benefits liabilities. This Fund receives from the Postal Service: 1) the pension savings provided to the Postal Service by the Postal Civil Service Retirement System (CSRS) Funding Reform Act of 2003 (P.L. 108–18) that were held in escrow through 2006; 2) a 10-year stream of payments defined within the Act to begin the liquidation of the Postal Service’s unfunded liability for post-retirement health benefits; 3) beginning in 2017, payments for the actuarial cost of Postal Service contributions for the post-retirement health benefits for its current employees; 4) beginning in 2017, a 40-year amortization payment to fund any remaining unfunded liabilities associated with post-retirement health benefits of Postal employees; and 5) the surplus resources of the Civil Service Retirement and Disability Fund that are not needed to finance future retirement benefits under CSRS to current or former employees that are attributable to civilian employment with the Postal Service, including the savings from shifting the responsibility for retirement credit related to military service from the Postal Service to the Treasury. Since the Act’s passage in 2006, the Postal Service contributed over $50 billion to the Retiree Health Benefits Fund but has defaulted on $34 billion in total required payments since FY 2012.

Beginning in 2017, the Act also requires the Postal Service to begin a 27-year amortization to retire its unfunded liability under CSRS.

The activities of the Postal Service are financed from the following sources: 1) mail and services revenue; 2) reimbursements from Federal and non-Federal sources; 3) proceeds from borrowing; 4) interest from U.S. securities and other investments; and 5) appropriations by the Congress. All receipts and deposits are made to the Postal Service Fund and are available without fiscal year limitation for payment of all expenses incurred, retirement of obligations, investment in capital assets, and investment in obligations and securities.

The Postal Service’s statutory borrowing authority is capped at $15 billion, with the annual increase in outstanding debt limited to $3.0 billion. As of September 30, 2016, the total debt instruments issued and outstanding pursuant to this authority amount to the full $15 billion.

The Budget estimates that the Postal Service will have an annual operating deficit of $4.7 billion in 2018 and more than $5 billion in each subsequent year through 2027. Given the Postal Service’s history of using defaults to on-budget accounts to continue operations despite losses, the Budget reflects partial or full defaults on required pension and retiree health amortization and normal cost payments to prevent the Postal Service from running unsustainable deficits. See also the Budget Process section of the Analytical Perspective volume of the Budget.

The Budget proposes legislation grounded in the principles of fiscal responsibility and sound financial management to restore solvency to the Postal Service. The proposal would ensure that the Postal Service funds existing commitments to current and former employees from business revenues not taxpayer funds.

The Budget proposes operational reforms to reduce costs and improve revenue, including: 1) authority to reduce mail delivery frequency where there is a business case for doing so; 2) allowing the Postal Service to leverage its resources by increasing collaboration with State and local governments; 3) allowing the Postal Service to begin shifting to centralized and curbside delivery where appropriate; 4) enhancing Postal Service governance to ensure sound financial management; and 5) requiring the future rate structure for the Postal Service to provide enough flexibility to ensure both the stability of Postal operations and the ability of the Postal Service to meet its statutory obligations for retiree health and pension costs. The Budget estimates that these operational reforms will improve the Postal Service’s financial position by $47 billion over 10 years.

The Budget also proposes Government-wide reforms to pensions and health insurance costs that are estimated to further reduce Postal Service operating costs by $33 billion over 10 years. See the Office of Personnel Management (OPM) section of the Appendix for more information. Consistent with these Government-wide changes, the Budget proposes modifying the Postal Service’s contributions for life and health insurance for employees to be consistent with the employer contribution provided for all other Federal employees. This change provides $1 billion in relief over the Budget widow.

Finally, to better reflect the true cost of the Postal workforce, the Budget proposes to require that OPM calculate any unfunded liabilities and resulting amortization payments for the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS) using factors (including investment returns, salary growth rates, and cost of living adjustments granted to Postal retirees) specific to the demographics of the Postal Service workforce. These changes will reduce Postal Service costs by $3.4 billion over the Budget window.

In total, the Budget estimates that these reforms will reduce the unified budget deficit by $46 billion over 10 years and result in on-budget savings of $27 billion through higher payments from the Postal Service to on-budget OPM accounts.

Please Note: We, PEN, cannot answer questions regarding this proposed budget. We have no idea whether or not these proposals, or the budget, will become law in current form or in any form.